Under the revised code, the amount of income exempt from the AMT went up to $44,350 from $42,500. For married couples, it rose to $66,250 from $62,550.

According to The New York Times, on Dec. 19, “House Democrats angrily approved the bill,” having failed to get Republicans to endorse new tax allocations that would have paid for the patch.

In contrast, a statement from White House press secretary Dana Perino said, “We’re pleased that today Congress was finally able to pass legislation, without raising taxes.”

The AMT was first devised in 1969 to prevent the top one percent of earners using deductions and tax shelters to evade tax. People falling in that bracket were required to calculate a second, alternative tax payment and pay whichever amount is the greater.

However, thanks to inflation, a much larger proportion of Americans have to calculate the alternative tax than was originally intended. Approximately, 20 percent of Americans were affected by AMT this year.

One untoward consequence of the new legislation is that it is likely to delay the payment of refunds, because the IRS has to reprogram its computers.

That could be more than an inconvenience. Morgan Stanley analyst David Greenlaw said there is a possibility that the delay could hurt the economy in the first quarter of next year.

“Since surveys show that many consumers plan their spending around the holidays based on an assumption that their tax refund will be available at a certain time, and because the looming delay to the refund season has not yet been widely publicized, we may see a spike in demand for refund anticipation loans,” Greenlaw writes.

On Dec. 19, Congress approved the AMT patch, which raises the threshold for qualifying for the alternative tax. According to The New York Times, the threshold moved to $44,350 from $42,500. For married couples, the exemption amount is now $66,250, up from $62,550. White House press secretary Dana Perino said in an official statement, “The AMT was never intended to hit these middle-class taxpayers, and the last thing they or the U.S. economy needs is a tax increase.”

According to the Congressional Budget Office, the rationale behind the AMT “is to keep taxpayers with high incomes from paying little or no income tax by taking advantage of various preferences in the tax code.” Those filing using AMT rules can exempt certain forms of income, but in turn are prohibited from claiming other deductions. Previously, less than one percent of taxpayers had to file under this scheme. But owing to inflation, by 2010 about one-fifth of taxpayers will be liable to the alternative tax. Nina Olson, the national taxpayer advocate, in a report given to Congress in 2001 called the AMT “the most serious problem faced by taxpayers.”

The Internal Revenue Service has begun to update its tax processing software to bring it in line with the new legislation. “Our people will do everything they can to quickly update our systems for this major change and make this filing season as smooth as possible for everyone,” said Linda Stiff, acting commissioner of the IRS.

David Greenlaw, an analyst for investment bank Morgan Stanley, says that Congress’s adjustment of the alternative minimum tax will result in delays that could stunt the U.S. economy, at least temporarily. As new calculation methods will need to be installed into federal systems, the IRS are likely to be unable to issue refunds for the coming tax season until mid-February at the earliest. “Since surveys show that many consumers plan their spending around the holidays based on an assumption that their tax refund will be available at a certain time, and because the looming delay to the refund season has not yet been widely publicized, we may see a spike in demand for refund anticipation loans,” Greenlaw said.

In his April 10 piece, Slate columnist Daniel Gross sounds off about proposed Democratic reforms to the AMT. He says it would behoove Democrats not to do anything to fix the tax law and instead to let any resultant fiscal error be a further burden on congressional Republicans, whose reputation has, he argues, been tainted by the heavy spending necessary to prosecute the war in Iraq. Gross writes, “The point of fixing the AMT is to shield millions of Americans from future tax increases. But Americans, who are instant-gratification addicts, would sooner vote for somebody who cuts taxes by $1,000 today than for someone who spares them a tax hike of $2,000 tomorrow.”

Robert MacIntosh, vice president of Eaton Wealth Management, says that many investors and funds advisers are baffled by AMT. A recent survey conducted by his firm revealed that only 47 percent of the investors knew what the AMT was. Income made when share prices go up often pushes middle-income investors past the liability threshold for the tax. “If you are subject to the AMT, you don't want to make it worse with investments that are also subject—instead, you need to buy bonds and funds that are free of AMT,” MacIntosh says.